Financial planning is an intangible service that is hard for most consumers to evaluate (at least, until they’ve actually been through it). And because of the uncertainty about whether the advisor will provide good financial planning value, perceived trust plays an important role in choosing a financial advisor. Yet, most advisors have few credible ways to convey trustworthiness, particularly when getting started – and as a result, will often choose to work for a large well-established firm, in the hopes of leveraging the big brand of a large firm to increase their perceived trustworthiness and ultimately win more clients.

In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we explore whether it’s really necessary to have a big firm brand in order to succeed as a new financial advisor, and whether choosing to affiliate with a well-established national firm is really still the asset it once was.

Because while it’s true that a well-known national financial services brand can lend credibility to advisors – especially for new advisors – and help them build trust with their clients, as we’ve seen following the most recent financial crisis, a firm’s brand may become a liability as well. This is particularly concerning given that changes to a large firm’s brand are almost always out of an advisor’s control, even though the advisor’s business may suffer the consequences.

Fortunately, the reality is that for most advisors, the importance of a firm’s brand will diminish with time. While clients may initially rely it as the basis for their trust, after gaining experience working with an advisor, client trust begins to shift from the firm to the specific advisor they are actually working with. This shift helps to explain why most advisors still retained most clients (even if they worked at a large firm whose reputation was sullied by the financial crisis), and similar is why most advisors who go independent (to a firm without a known consumer brand) still end out retaining most of their clients.

Fortunately for advisors who may have no desire to work for a big firm, there are other methods for developing trustworthiness as well. Having an effective website, and maintaining professional appearance and conduct, really matter when clients don’t have many other indicators of trust to rely upon. And independent advisors can and often do leverage the brands of their RIA custodians – most of which are national consumer brands as well. But ultimately, the “fastest” way to build a trusted brand is still through the development of a niche. Because the reality is that most individual independent advisors will never have the potential to become a nationally known consumer brand… but it is possible to become the known, liked, and trusted expert in a particular niche community in just a few years, which is more than enough for one advisor to build a successful practice!

The compounding growth of computing power suggests it’s only a matter of time before computers have the same “brainpower” as a human being. In fact, if Moore’s Law – that computing power doubles every 18-24 months – continues to hold, the crossover point where computers are smarter than humans might not even be all that far away. Which has troubling implications for a wide range of knowledge-based professions, from doctors, to lawyers, to financial planners who might someday be replaced by a “robo-planner” instead.

Yet research shows that our brains are hard-wired to process information differently when received from human beings rather than computers. We evolved as social animals – a trait that was vital to our survival in the early years – which means even if a robo-planner could deliver the same advice as a human, we might be less likely to take it.

In turn, this implies that the key trait for financial planners in the future will be the one skill that our brains are not programmed to receive from a computer: empathy. Because we need to feel that we are heard and understood before we’re willing to take someone’s advice about how to change our behavior, and those feelings of connectedness are an exclusively human-to-human domain.

Unfortunately, though, in today’s environment, there’s remarkably little in the way of “empathy training” for financial planners. But the good news is that empathy training is possible, and is actually on the rise in a number of other professions, from medicine to law and even to the military and the police. Which suggests it may only be a matter of time until it’s more readily available for financial advisors as well.

Still, though, with the onward marching of computing power, our transition from being “knowledge workers” to “relationship workers” may be here sooner than we realize. The good news is that means “robo-planning” will not be the end of human financial planners. But it remains to be seen whether or how many of us will be ready if and when the moment of change comes?

With over 75,000 CFP certificants, having an advanced designation is not the differentiator it once was in the marketplace. Instead, the successful growth of CFP certification, along with rising consumer awareness of the CFP marks, is turning the CFP into a minimum standard to be recognized as a professional, and those who really want to differentiate must pursue even most “post-CFP” certification instead.

In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we explore whether getting a PhD in personal financial planning is a good way to differentiate as an advanced practitioner… or rather, why a financial planning PhD is probably a bad idea for even sophisticated financial advisors.

Because the reality is that a financial planning PhD is really not just the ultimate advanced designation in financial planning. It’s really a research degree, with content that teaches students how to actually do real research, applying proper research methods and conducting the appropriate statistical analyses. A financial planning PhD doesn’t actually teach much at all about how to do financial planning; in fact, most of the PhD programs will expect candidates to have already learned that before applying (and/or may have to take “pre-doctoral” courses just to get the requisite education first).

Instead, the real purpose of getting a PhD in financial planning is to teach financial planning (at a higher education institution), or to do real research in financial planning. The good news is that there are a growing number of opportunities in both – in fact, the whole purpose of the origin $2,000,000 seed grant that the CFP Board made to Texas Tech’s personal financial planning PhD program in 2000 was specifically to help create financial planning PhDs who could go create and teach in other financial planning PhD programs (which is exactly what happened). And there is certainly no shortage of applied financial planning research opportunities.

But the bottom line is simply to recognize that practitioners who want “advanced” financial planning designations should seek out post-CFP designation programs, or perhaps a Master’s in Financial Planning. But a PhD is not just a more advanced designation; it’s really a teaching and research degree, and is best suited for those who really want to teach and do research, either in lieu of becoming a financial planning practitioner, or perhaps as a second career for those practitioners who are ready for a fresh new challenge!

In the past, learning to be a financial planner was something that you only did after spending years successfully selling financial services products. If you couldn’t “pay your dues” by doing the marketing and business development to get enough clients in the first place, you didn’t get to go take CFP classes and become a financial planner. You lost your job by failing to validate your (sales) contract.

In today’s environment, the tables have turned. Now, increasingly, new financial advisors arrive having already completed their financial planning education and passed the CFP exam. And not surprisingly, they’re looking for jobs where they can implement that financial planning knowledge with clients. Only to be told that they, too, must still spend time “paying their dues” in a back-office job before they get the opportunity to work directly with clients.

In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we dig into the whole concept of “paying your dues”, and why it actually is still relevant for financial planners today, even for those who studying financial planning before seeking out their first job.

Because the reality is that doing financial planning well is more than just having the technical financial planning knowledge. It’s also about having the skills to communicate with and interact clients – to show empathy – and find and bring on new clients as well. And if you don’t understand the inner operations of how the advisory firm works in the first place, you will also struggle to be successful as an advisor, as the reality is that a successful advisory career still means successfully working within, or creating, a business that serves clients, not just sitting across from the clients in meetings.

And in this context, “paying your dues” is not longer just about doing busy work for the sake of busy work, but actually learning what it takes to be a successful financial advisor, and practicing those skills (which takes time, even for the best of us). Just as Michael Phelps trained 6 hours a day for 6 days a week throughout his career – not to pay his dues but because that’s what training is – so too should new financial advisors be prepared to put in the time. Not because they’re paying dues, but because that’s how you really practice and develop and ultimately master your skills as a professional!

Accordingly, new financial advisors should embrace the opportunity for any kind of real job in an advisory firm, even if it’s not client-facing. Because anything, from helping with trading to doing operations paperwork, is relevant knowledge when you’re getting started and have so much to learn and experience.

Of course, once a skill is mastered, it’s time to find a new opportunity – which means moving up in the current firm, or finding a new job at a new firm if necessary. Failing to do so can turn a learning experience into a dead-end career track. But ultimately, that still doesn’t mean it’s bad to “pay your dues” – it’s simply an acknowledge that once you’ve taken a few years to learn the tasks, do what it takes to move forward and continue to advance your career to the next stage!

Even as the total number of financial advisors is in decline since 2000, the number of CFP certificants has been on the rise, driven by both the rising demand from consumers for financial planning advice, and a need and desire for financial advisors to differentiate themselves by providing financial planning services.

And according to a recent study by Aite Group, it turns out that getting the CFP marks really are good for business, with the average solo CFP certificant generating 40% more revenue, the average experienced solo CFP certificant generating 80% more revenue, and financial advisor teams generating 44% more revenue when they include at least 1 CFP professional. In turn, this results in the average CFP professional generating 14% to 33% more income than non-CFP advisors, even after controlling for years of experience.

Notably, though, the study also finds that while CFP certification is associated with higher income, it’s not necessarily because advisors get new clients simply by showing off their CFP marks. Instead, the positive impact derives primarily from enhanced credibility, improved technical expertise and knowledge (which also leads to better self-confidence as an advisor), and greater client satisfaction with the advisor’s (more comprehensive financial planning) services.

And given that some of the fastest-growing channels for CFP certification are now employee advisor roles at either independent RIAs or “online” brokerage/investment firms with retail advisors (i.e., Schwab, Fidelity, and TD Ameritrade, and now Vanguard), it appears that obtaining the CFP marks are increasingly becoming a key step to climbing the employee ladder as a financial advisor as well.

To say the least, though, with the potential for a 14% to 33% increase in lifetime earnings, at this point the CFP marks continue to more-than-sufficiently-justify the $3,000 – $10,000 required investment into a CFP educational program to obtain the certification!

It takes a substantial investment to earn the CFP certification. The financial cost can be significant, between signing up for the educational classes, potentially take a live exam review course, and enrolling for the CFP exam itself. And the cost in terms of time is significant, too – for many, the entire process often takes 12-18 months of putting in the hours it takes to learn the material. Fortunately, at least some advisory firms are willing to help share in some of the costs.

In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we look at the question of how much should an advisory firm be expected to invest for a paraplanner to get the CFP marks? And in particular, if an advisory firm is willing to help cover the financial cost, is it appropriate to ask for time off to study as well?

The short answer: No. While a growing number of firms will at least support the financial cost of CFP coursework – in part, because it may be outright too expensive for many entry level paraplanners to afford on their own – most firms will still reasonably expect the paraplanner to make an investment, too. Which means if the paraplanner can’t put in the dollars, at a minimum he/she can put in the time it takes to study.

Given the commitment, that may well mean that a paraplanner who wants to earn their CFP marks and get promoted will have to carve out from their personal time in the evenings and on the weekends to study. But the reality is simply that sometimes, that’s what it takes to get ahead. You always have the choice to not make the investment, and remain in the job you’re currently in. But if you want to take your career to the next level, you have to find a way to make the investment in yourself, and not just expect the firm to give you the dollars and the time!

The path of becoming a financial advisor is viewed as a very entrepreneurial one, starting from scratch and building a client base who pay you for services, growing over time into a business that can generate substantial income for the advisor/owner/founder. The growing trend of independent advisors, whether in RIA or broker-dealer form, just further emphasizes the entrepreneurial spirit of the financial advisor community, and their desire to build businesses of value… or at least, a practice that can generate substantial ongoing income throughout their working years.

In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we look at the key distinction between building a business versus a practice. Because while the terms are often used interchangeably, the reality is that they’re actually very different roles.

Building a successful practice means getting clients who will pay you for your services, and leveraging your personal productivity to serve them effectively. By contrast, building a successful financial advisory business is about hiring other advisors who will be paid for their advice, and building the infrastructure necessary to support them, and ensure that clients are served well. In other words, it’s the difference between delivering financial advice yourself, versus building a business to deliver financial advice.

And the difference matters, because the reality is that a practice can generate substantial income for successful advisors, but will only ever have very limited enterprise value. On the other hand, a bona fide advisory business can become an extraordinarily large financial asset, but comes at a cost of what could be years or decades of lower income as dollars (and a lot of sweat equity) are reinvested back into the business to continue to grow it. One benchmarking study recently found that it takes growing an advisory firm to more than $1B of AUM, just to get the partner/owners back to the same take-home pay that the most successful solo advisors can generate.

Ultimately, the choice is the advisor’s about which to build – a business vs a practice – but it’s crucial to recognize the difference, to ensure that you’re building what you really want!

According to most industry benchmarking studies, average income of an experienced financial advisor is roughly 2x to 3x the average household income in the U.S., which makes being a financial planner an incredibly appealing career, both to college graduates looking for a career, and those who may feel they have “topped out” in their current industry and wish to make a career change into financial planning. The caveat, however, is that financial advisors also have an incredibly high attrition and failure rate in the early years, which means the decision to try is not without significant risks. For many, their greatest fear in getting started is simply that they don’t have the “right” personality type to succeed in the first place.

In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we look at what kind of personality type it does take to succeed as a financial advisor, and how despite the conventional view that being a financial advisor is a quintessential career for extroverts (where you meet lots of people to work with and do business with), in reality many introverts are also very successful at being a financial advisor. Because while being an introvert might be a little more challenging when “prospecting” for potential clients, the fact that introverts more commonly form deeper relationships to fewer people is actually a great fit for establishing a great and loyal client base!

In fact, for many who start out as a financial advisor, the biggest roadblock is not about being an introvert versus extrovert, but simply about having the “grit” necessary to handle the emotional rollercoaster that is being an entrepreneur and building your own business. That includes both the sheer financial ups and downs of starting a business from scratch with no income, and the amount of rejection that occurs when prospecting for clients, where “just” being rejected 2-out-of-3 times is actually a fairly solid 33% close rate!

Fortunately, there is an alternative career path for financial advisors beginning to emerge as well – the employee advisor path, which starts out as an entry level “paraplanner” and climbs from there to an associate advisor, lead/senior advisors, and perhaps even to becoming a partner someday. Unfortunately, though, the relatively slow progression down that career path – which may take as long as 7-10 years to reach a senior advisor position – is for many career changers “too long” to wait to reach the income levels of their former careers.

Nonetheless, the bottom line is that the “right” personality type for being a financial advisor is not about being an introvert or extrovert – because either can create meaningful relationships with clients (and both will struggle if they are too extreme in either the introversion or extroversion direction) – but about having the patience and focus to build your career as an employee, or the sheer grit (and financial capabilities) to handle the entrepreneurial rollercoaster of starting your own advisory firm from scratch!

It’s Memorial Day once again, which means the busy spring conference season is coming to an end, and it’s time for the annual summer slowdown for most advisory firms – as clients begin to go on summer vacations and it’s harder to schedule them for meetings, advisors have some time to relax with family themselves… and catch up on the reading list.

And so continuing the trend, I’m now excited to share my latest 2016 Summer Reading list for financial advisors, with suggestions on books about everything from how to improve your personal and business focus, several books on advisor marketing and practice management, and a few more to challenge your thinking about the business world of the future (as more and more becomes either “free”, or accessible at ever-lower costs thanks to a growing number of mega platform businesses… which may someday make their way into financial services as well!). As you might guess from the common theme of the books, I’m spending a lot of time thinking about the future of the financial advisory and where the best opportunities may be going forward from here!

So as we head into the summer season, I hope that you find this suggested list of the latest books to read to be helpful… and please do share your own suggestions in the comments at the end of the article about the best books you’ve read over the past year as well!

Historically, financial advisors were primarily salespeople. Their role was to sell the insurance or investment products of their companies, and later, only after they proved themselves to be good at sales, did they have the opportunity to earn their CFP certification and do financial planning. But with the rise of the AUM model, the financial advisor career track is changing.

In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we look at how the financial advisor career track is evolving today, where increasingly financial planners can get hired without sales skills… but have to worry about whether they’ll hit a wall in their career progression in the future if they can’t learn to prospect for new business.

The good news of the ongoing growth of recurring revenue business models like the AUM model – which should only grow further after the new Department of Labor fiduciary rule drives even more advisory firms towards Level-Fee Fiduciary compensation – is that the opportunities for non-business-development employee advisors are better than ever, with even more opportunity down the road. Simply put, we’re seeing the ongoing separation of being the person who gets the clients, versus the one who services them with great financial planning. Just as sales and service are separated in most other industries as well.

Of course, the caveat is that because it’s harder to get a new client than to serve and retain an existing one, those who can do business development and get new clients will likely earn better compensation, and have more opportunities to become a partner with their advisory firm (as it’s easier to offer a slice of the pie to a potential partner who’s helping to make the pie bigger for everyone). Which means there’s still a good incentive opportunity to learn to do sales and prospecting. But at worst, it’s not a skill that needs to be developed later in the financial advisor career track, and shouldn’t prevent you from earning a reasonable living in the meantime!